According to an article in US News, co-ownership of homes soared by over 700% between 2014 and 2021. That's because this is a good option for those who want to invest in real estate but can't afford to buy a property on their own.
There are two main ways to own a property together, namely joint tenancy and tenancy in common. In cases of co-ownership, the word tenant means ''owner'' not ''renter''.
If you're considering buying a property with someone else, you must know what's involved in each option. Keep reading to discover the differences between joint tenant versus tenant in common property ownership.
Joint Tenant Versus Tenant in Common Arrangements Defined
Joint tenants own property together and this is a popular choice for those who want to dip their toes in the realm of investment property. Each of them owns an equal share of the property.
Four main requirements define this type of joint property ownership, namely:
- Each tenant must acquire the property at the same time
- Joint tenants receive their interest from the same source, i.e. deed or title
- They have equal shares of the property
- Joint tenants have equal rights to use the property
It makes sense that each party must pay an equal part of the purchase price for the property, too.
With tenants in common arrangements, the co-owners may have equal or unequal shares in the property. For instance, one owner might own 60%, while the other owns 40%.
Tenancy in common centers on the same aspects as joint tenancy, with a few differences:
- Tenants in common may acquire their interest at different times
- Tenants in common can receive their interest from different sources i.e. wills, deeds, or titles
- Tenants in common needn't own an equal share of the property
The final criterion is the same, with all parties having an equal right to possess and use the property.
In both cases, if the owners decide to rent the property, they receive an equal share of the income.
Transferring Co-Owned Property Rights
If one owner in a joint tenancy sells their interest, the tenancy becomes a tenancy in common. If one owner dies, the remaining tenants inherit their portion of the property.
In this case, the heir does not pay inheritance tax on their new shares (if the property is in a state that imposes this tax). When they die, the ownership type converts to a tenancy in common and the heirs pay inheritance tax.
Tenants in common can sell their portion of the property without affecting the other owners. If they pass away, their heirs take ownership of their portion.
Make the Most of a Co-Owned Investment Property
There's little difference between joint tenant versus tenant in common ownership when you want to rent out your investment property. You simply divide the costs and profits according to the share you hold.
Either way, getting a property manager on board can ensure your success in this endeavor. Get in touch for more information and advice about buying and renting real estate in Raleigh, North Carolina.
